Uber a challenge to cities’ broken taxi systems: Crowley in the Citizen

Writing in the Ottawa Citizen, Macdonald-Laurier Institute Managing Director Brian Lee Crowley says that mobile taxi app Uber is forcing municipalities like the City of Ottawa to confront their backwards cab licensing systems.

Ottawa has steadfastly resisted Uber’s recent expansion to the Nation’s Capital, but Crowley says the new service is making cab companies redundant and out-of-date.

The Citizen ran a shorter version of this column.

By Brian Lee Crowley, Oct. 10, 2014

Can you blame Uber for being a little confused?

Uber is a smartphone ride-sharing app that allows people looking for a ride to connect instantly with available drivers. This technology is being rolled out around the industrialised world, including in various large Canadian cities.

High-tech ride-sharing represents a huge threat to the taxi industry, which is a cosy collusion between incumbent service providers and municipal governments. Cities limit the number of cabs, driving up the price of a taxi ride and creating inevitable shortages at periods of peak demand. In return the lucky owners of taxi permits give their political support to the chummy politicians who keep this game going.

In Ottawa, the latest city to see Uber open for business, a taxi permit sells for over $250,000. Just like that other conspiracy against the consumer, supply management, the sky-high value of these permits reflects the ability of their owners to eliminate competition and capture unjustified profits.

It was frustration with such consumer exploitation that led John Baird, Canada’s Minister of Foreign Affairs, to tweet in Ottawa the other night, “75 minutes. 5 calls. No cab. Tonight I see the need for more competition with @Uber”.

But the city and the taxi industry, like many of their peers across Europe and North America, are not going down without a fight. And the ground on which they like to fight is that they alone are the defenders of the public’s safety in a dangerous world. They require that drivers be trained, taxis be insured and inspected and consumer complaints be investigated.

Uber, says the city, endangers the health and safety of Ottawans by heedlessly exposing them to the risk of unqualified and possibly dangerous drivers and uninspected cars.

I’ll get to these claims in a moment. But first here’s why Uber might be confused.

If you Google Ottawa and carpooling, you quickly land on a city webpage touting the benefits of ride sharing. Cut costs! Be green! Destress! Meet new people! You are exhorted not to use it only for work but for shopping and other trips too. “Carpooling is one way that the City… is working towards addressing traffic congestion and making the most of our transportation network.”

Not a word about the awful dangers you might face. Has the city licensed the drivers? Checked for a criminal record? Required proof of suitable insurance? Inspected the cars? Nope; I know because I registered as a driver. Caveat emptor prevails. Moreover the website discusses quite openly that money will change hands “to cover expenses.”

So if we take the city at its word in its crusade against Uber, by its own admission Ottawa is proudly pimping rides in rolling deathtraps with unknown wackos about whom it may know as little as a generic e-mail address.

What rank hypocrisy. And I strongly suspect that Ottawa is not alone and that many cities vociferously opposed to Uber are also at the same time sweetly promoting the very thing they condemn in Uber.

Uber, by contrast to the municipalities, has a more rigorous screening process for drivers than Toronto’s (its website doesn’t offer a comparison with other Canadian cities’ requirements, but Uber’s background checks are serious). The company and its insurers offer $5 million worth of bodily injury and property damage coverage on every Uber trip—again a level of protection superior to what is required in Toronto. That’s in addition to any coverage the driver has.

When you use the app to order a ride, in response you don’t just get a message saying a car is on its way—you see the driver’s name, photo, licence plate number, car make and model, and feedback rating from other customers . You actually know who’s picking you up ahead of time. Speaking of the feedback rating, Uber’s app solicits feedback from every passenger after their ride, asking them to rate their experience with each driver and so to build up a more comprehensive and publicly available view of drivers over time than you get stepping into the average anonymous cab.

In fact Uber makes cab companies redundant. There was a time when it was impossible for the average person to know who had cars and drivers to hire, where they were, who it was safe to ride with and how to contact them at the precise moment you needed them. At that primitive state of technology, cab companies with a central phone number and radio dispatch were the correct solution. You phoned one number and a company whose reputation was on the line responded (or not, as the case may be!).

Today that solution is itself primitive. The internet has made the cost of acquiring the relevant information about car availability and driver qualifications fall precipitously. Drivers and passengers can effortlessly match supply and demand thanks to the intermediary of Uber and other ride-sharing apps. Uber’s reputation and therefore business success literally rides on it giving passengers a superior experience to cabs. I know that’s a low bar (I have always felt less safe in the average cab than in any privately-owned car I have ever ridden in), but that’s why the city’s claim to be acting out of a concern for consumer welfare and public safety is so laughable.

In fact a system that is guaranteed, like the status quo, to create shortages of drivers and cars at precisely the moments of peak demand when people are most likely to have been drinking (Friday and Saturday nights) is itself a threat to public safety. By contrast an on-line ride-sharing service like Uber can respond to varying demand by bringing on stream cars that otherwise would be idle. The pool of cars is theoretically some significant share of the entire fleet of privately-owned cars in the city.

Aside from the fact that Uber counts their driver’s time and the company’s service as costs to be reimbursed, there is no significant difference between the ridesharing promoted by the city and Uber’s except that Uber’s is actually efficient (no wonder the city feels threatened) and rewards drivers for turning their empty passenger seats into valuable transport capacity when needed.

That underlines the second form of hypocrisy in the city’s position. Ottawa is currently spending many hundreds of millions on a rapid transit system whose impact on city traffic is likely to be minimal if other similar cities’ experience is anything to go by. It claims to want to get better value out of the city’s transport resources and to pursue eco-friendly means to move people.

Ride-sharing, as the city itself recognises on its site, is a genuine green transport alternative. It does not require putting any new vehicles on the road. On the contrary, it makes more intensive use of the existing fleet of cars. About 2.2 million people take car trips daily in Ottawa. Increase that by a mere 15 percent and you will be moving more people than the entire public transit system of Ottawa. And you’ll do it at no capital or operating cost to the city. Unlike public transit, rides can be tailored to the precise requirements of passengers, and supply will rise to match demand flexibly without expensive split shifts for bus drivers or the maddening cab shortages on Friday nights or rainy days.

A city genuinely interested in greener transport would be breaking up the old taxi oligopoly and making “every car a cab”, to quote my friend Patrick Luciani, who wrote about this years ago. It certainly wouldn’t be persecuting Uber drivers with punitive fines as Ottawa is doing. Getting better transport value out of the existing stock of cars is as green as it gets. And ride-sharing apps like Uber, that allow passengers to pay the driver the value of the service they offer, will freely reward car-owners who contribute to this socially desirable result.

Yes, this disruptive technology will force cities across the land to confront the mess they have created by trying to confer benefits on cab licensees at the expense of consumers. They’d better get on with that unavoidable job and stop trying to pretend that they are the valiant and disinterested guardians of public safety or the friends of the environment. They are only embarrassing themselves.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.